The BOJ monetary policy meeting concludes today, here is a preview of what to expect
But first - if you are wondering what time the announcement is due:
- BOJ meeting today - here is what to expect in the announcement (and When!)
- Technical analysis of what time to expect the BOJ announcement
And, second, prior previews posted:
- BOJ preview - BoJ likely to maintain extremely easy monetary policy
- Quick preview of the BOJ meeting this week
- Bank of Japan policy announcement due Tuesday - preview
- Bank of Japan previews (announcement likely Tuesday from 0230 GMT)
OK, this now via Bank of America / Merrill Lynch - they say the market over-reacted to the Bank reducing JGB purchases in early January:
After a quiet 2017, interest in the BoJ is rising once again. On 9 January, the BoJ's announcement of a ¥10bn reduction in its "rinban" purchase of JGBs in the 10-25yr and 25-40yr segment caused a strong reaction in the markets and reignited headlines of early BoJ normalization.
- As we noted last week, we think the markets (in particular FX) over-reacted to the announcement.
- Our view is that the modest trimming of purchases is not, in and of itself, a signal of a new policy bias.
Questions at 23 January's post-MPM press conference will nonetheless focus on the BoJ's "stealth tapering" of JGB purchases and the recent market reaction.
- We expect the governor to reiterate the central banks' stance that the quantity of JGB purchases is an endogenous variable under YCC and could slow or reaccelerate depending on trends in the economy and financial markets.
- That said, we think the governor will strike an overall dovish tone at the conference to minimize risks that speculation over a pre-mature BoJ exit would trigger unwanted yen appreciation.
BoA/ML go on more generally on global central banks, ton the ECB in particular (worth notning ahead of Thursday's European Central Bank meeting):
- The risk of rate hikes in 2018 has ranked top in our client conversations this week.
- We remain confident that this won't happen in spite of early change to communication. Inflation dynamics will matter for rate moves. FX enters in these considerations.
- Consequently, we stick to our view that the depo rate will be raised in 2Q19 and 4Q19 (20bp each). Last week's ECB speak, even among hawks, supports this view. Markets suggested we were (unusually) hawkish until recently. Pricing has now moved our way.
(bolding mine)
